Observant precious metals investors would have recently noticed a rare – almost unheard-of – occurrence: a bullion market where prices actually respond to supply/demand fundamentals. No, obviously I’m not referring to either the gold or silver market, but rather the platinum market.

Analysis was provided by a mining website. Unlike the pseudo-analytic drivel spewed by the mainstream media concerning commodity markets; this featured long-term, hard data and cogent reasoning – versus the short-term trivia, empty rhetoric, and fear-mongering we generally get from the Corporate Media.

Specifically, the article noted that recycling in the platinum market had quadrupled over the last decade. Compounding that bearish supply factor, industrial demand has softened considerably, and even jewelry demand has been shown to be more price-sensitive than previously thought.

The combination of these factors has meant that platinum inventories are abundant, and with weak supply/demand fundamentals and abundant inventories, prices have floundered; with the price of platinum now trading below the price of gold (a very unusual situation).

With a concrete example illustrating both supply/demand fundamentals and how markets are supposed to respond to those fundamentals; the extreme/serial manipulation of the silver market appears even more blatant in comparison. Now let’s look at the “fundamentals” in the silver market.

We can begin by looking at the absurdly low, current price of silver. This artificial/suppressed/manipulated price can be illustrated in several different ways. Relative to the price of gold, silver is priced at less than 1/3 of its historical average.

During the nearly 5,000 years in which humanity has been mining/refining gold and silver; the gold/silver price ratio has averaged roughly 15:1. Yet currently (and through all the recent decades of silver manipulation) this ratio has been depressed to 50:1 (or lower).

We know that this is a case of silver being under-priced rather than gold being over-priced through simply examining the supply-side of the gold and silver markets: the miners. Gold and silver miners are experiencing their second “depression” in five years – as the radical under-pricing of silver and gold has made it difficult for established miners to raise capital, and nearly impossible for the junior exploration companies who are the life-blood of the mining industry.

Indeed, silver mining is so severely depressed that despite a six-fold increase in the price of silver over the last decade most of the world’s silver is still produced as a secondary byproduct of other mining – while bankrupted silver mines remain shuttered all over the world, and new projects are extremely slow to develop.

Further proof of the suppressed/manipulated price of silver comes from the collapse of inventories, where global inventories plummeted by more than 90% over just 15 years (from 1990 – 2005). Despite the collapse in inventories, the six-fold increase in the price of silver has barely registered any reaction at all on the supply side, where mine-supply limps higher at an anemic rate of about 2% per year.

This is yet more proof of silver price-manipulation, as with any/every commodity market where prices are free to respond to supply/demand fundamentals, we would see prices rise to whatever level was necessary to fuel new supply and discourage consumption – until supply/demand equilibrium is reached. This is the literal definition of a “free market”, something which most of us have never seen in the silver market during our entire life-span.

This brings us to recycling. Here a comparison of the silver market and the platinum market is highly instructive given the many, close similarities between the two markets. Both silver and platinum possess an abundance of superb chemical/metallurgical properties. Both are used in many high-tech industrial applications. And both tend to be used in small quantities in those applications.

Here the similarities end. As already noted, platinum recycling has quadrupled over the past decade, despite the price of platinum having merely doubled over that time-span. In our inflation-ravaged economies, the price of platinum has under-performed versus most other commodities.

In the silver market, those parameters are totally reversed. Despite the six-fold increase in the price of silver over that same time-span, silver recycling has remained essentially flat. The least-worst source for supply/demand data on the silver market is the Silver Institute. Silver-recycling is currently such a minor factor in the supply/demand picture that it doesn’t even record recycling data as a category unto itself.

Instead, silver-recycling is subsumed by the category of “old silver scrap” sales, which primarily consists of ordinary people pawning their sterling silver tableware and tea services. Yet even when we combine the pawning and actual “recycling” of silver into a single category, we see an anemic rise of little more than 25% while the price of silver increased 600%.

Half of that increase occurred in 2011 alone, when the price of silver briefly spiked to a (nominal) 30-year high. With the price of silver now more than 30% below that peak, we will likely see that recycling/scrap-sales of silver fell in 2012.

We live in an era of recycling mania, yet silver-recycling is nearly as depressed as the silver mining industry itself. Why is this? Severe under-pricing of silver is the only possible explanation.

With silver inventories having collapsed while platinum inventories remain abundant; we collectively have a much greater motive/incentive to recycle silver than to recycle platinum. With silver being used in some of our most-important emerging technologies (everything from cruise missiles to solar-panel cells to unique anti-microbial compounds); we have a much greater incentive to recycle silver than to recycle platinum.

Again, there is only one possible explanation as to why platinum recycling is exploding while silver recycling is extremely depressed: the gross under-pricing of silver. In previous commentaries I have pointed out how the permanently depressed state of silver mining is absolute proof of silver price-suppression.

For over 4,000 years most of the world’s silver came from “primary” silver mining. It was only after the price of silver was driven (manipulated) to a 600-year low (in real dollars) that global silver mining collapsed in the 1990’s, with more than 90% of the world’s silver mines bankrupted. Even after the partial recovery in silver prices, most of these mines remain closed.

With recycling being the “other component” of supply, we have completely independent verification of this principle of logic/economics previously expressed. The only possible reason why the supply of silver remains in a permanent state of depression – despite the complete collapse of inventories – is because of the permanent suppression of the price.

With the price of gold also depressed (as evidenced by the struggling gold miners); at its historical average $110/ounce for silver would represent an absolute minimum “fair price” for silver today. However, by the time prices had risen enough to restore health to the silver and gold mining industries; we would more likely be looking at a “minimum price” for silver somewhere in excess of $150/oz – today.

Given the extreme/unlimited (and completely insane) currency-dilution now taking place on both sides of the Atlantic, this “minimum fair price” for silver can only increase exponentially from the $150/oz level. The platinum market provides us with a crystal-clear picture of how the silver market would behave – if it was ever freed from the relentless price-manipulation (and fraud) of the Western banking cabal.

..."When you talk about "ravenous appetites", now we get to the crux of the matter: how much (real,physical) bullion do the bankers need to "feed" the Big Buyers in order to dissuade them from instigating a bullion-default?"

would seem to have MUCH more to do with gold than silver, unless you can tell me which "bankers" have such loads of silver to "feed" the Big Buyers. I don't know of any, do you? Others I've spoken with considered "experts" in the PM area have also told me they don't know who if anyone (at least in the Western bankster-PM market-connected world ) has a large stash of silver that is dumpable on the market in size large enough to satisfy the huge physical demand. I'm speaking specifically about silver, not about gold or the PMs in genl.

Now, if you're talking about da Big Boyz, like China and sovereign wealth funds, et al, perhaps "playing" the market some by dumping physical silver at opportune times in order to facilitate stop loss selling to bring their buy-in prices down (shaking the tree so to speak), well perhaps. But in the end, it appears more likely that they are the buyers when the banksters, esp. JPM, are taking silver down, taking big gulps on the big dips. So again, where is all this silver coming from?

Again, JT, "no offense intended". I'm a small investor myself (no matter what cut-off point you choose), so in no way was I suggesting that small investor = uninformed.

"Where" is the silver coming from? Before one can attempt to answer that question we must acknowledge some realities about this market.

In some respects the silver market is now totally opaque. There ARE no reliable numbers on stockpiles or inventories -- since the great Inventory Fraud began in 2005. So not only do we not know precisely how much silver is readily available for sale (inventories) we don't even have a good idea of how much silver might still POTENTIALLY be available (stockpiles).

Then on top of this we have the Big Buyers supposedly "taking delivery" who allow themselves to be bought-off with a "cash settlement" at the last minute. Last I heard, the Big Buyers could net about a 30% premium by taking cash instead of metal.

So when we don't know precisely how much silver is available and don't even have a precise idea of how quickly inventories are running down, then we end up with a guessing game.

This is why I never attempt to attach any sort of precise timetables to the events we know will unfold in the not-too-distant future. There are simply too many unknown variables to formulate precise estimates.

We are left with only one general principle: the longer the Game is extended, the more-massive the spike when the market implodes.

But even here, be careful what you wish for. There is a very good chance that any "default" event will be IMMEDIATELY followed by some sort of attempts at bullion CONFISCATION.

+2

...written by jtjtjt,
January 18, 2013

Jeff, well yes, I'm a smaller investor, compared to "larger" investors, wherever that cutoff might be, so I look at things from my perspective first of all, b/c I have to. But I'm not totally uninformed about the rest of what's going on out there. And your comment,

"When you talk about "ravenous appetites", now we get to the crux of the matter: how much (real,physical) bullion do the bankers need to "feed" the Big Buyers in order to dissuade them from instigating a bullion-default?"

would seem to have MUCH more to do with gold than silver, unless you can tell me which "bankers" have such loads of silver to "feed" the Big Buyers. I don't know of any, do you? Others I've spoken with considered "experts" in the PM area have also told me they don't know who if anyone (at least in the Western bankster-PM market-connected world ) has a large stash of silver that is dumpable on the market in size large enough to satisfy the huge physical demand. I'm speaking specifically about silver, not about gold or the PMs in genl.

Now, if you're talking about da Big Boyz, like China and sovereign wealth funds, et al, perhaps "playing" the market some by dumping physical silver at opportune times in order to facilitate stop loss selling to bring their buy-in prices down (shaking the tree so to speak), well perhaps. But in the end, it appears more likely that they are the buyers when the banksters, esp. JPM, are taking silver down, taking big gulps on the big dips. So again, where is all this silver coming from?

+1

...written by Andy Bergeron,
January 18, 2013

Jeff: to add to your point on silver scrap, I can provide some anecdotal evidence. One of my good friends operates a large pawn shop. 5 years ago he was sending at least 20 pounds/month to the local refinery. Last year, he didn't even hit 20 pounds. Grandma's silver service has long been melted. The much larger issue is that silver, much like oil, is a far more critical resource for the global economy than most realize, given all of its magical properties most of which are non-subsitutable. I know that you disagree with me that we may be approaching "peak" silver on the planet, but the drastically declining ore grades mined point to this, regardless of future price increases that would make old deposits profitable.

+0

...written by Jeff Nielson,
January 18, 2013

I just don't get it (and I would imagine many of the rest of us that have tried for years and even decades now to try to preserve our wealth thru purchase of gold and silver, and esp. silver). WHERE THE HELL_o is all this silver coming from to continue to feed the ravenous appetite of physical silver buyers??? Many were speaking of and looking for a delivery default on silver at the CRIMEX 4 and 5 years ago!! Yet on and on and on it goes...where it stops...nobody knows. But, as the thesis goes, "What can't go on forever must stop." When is this going to stop? Or is there some other source of silver we just don't know about that continues to fill the physical orders?

JT, I completely understand your frustration here. But you have to realize that this frustration stems from looking at the market from the perspective of a small investor.

No disrespect intended. For quite a few years I looked at the market the same way (and experienced similar frustrations). Then one day it sunk in: WE don't control this market...but neither do the bankers.

The market is controlled by the Big Buyers (some governments, but mostly just large, private investors). What you have to realize is that the Big Buyers do not benefit from a bullion default -- because these people are NOT accumulating bullion to make a trading profit.

They are accumulating bullion as THE premier financial asset (as the bankers' Paper Empire implodes around us). What a bullion default means to these people is the END of cheap bullion. It is their LAST resort -- not their first one.

When you talk about "ravenous appetites", now we get to the crux of the matter: how much (real,physical) bullion do the bankers need to "feed" the Big Buyers in order to dissuade them from instigating a bullion-default?

If you can find someone who can answer THAT question, then I could probably give you a pretty fair estimate on when to expect a bullion-default...

+1

...written by jtjtjt,
January 17, 2013

So Jeff...I just don't get it (and I would imagine many of the rest of us that have tried for years and even decades now to try to preserve our wealth thru purchase of gold and silver, and esp. silver). WHERE THE HELL_o is all this silver coming from to continue to feed the ravenous appetite of physical silver buyers??? Many were speaking of and looking for a delivery default on silver at the CRIMEX 4 and 5 years ago!! Yet on and on and on it goes...where it stops...nobody knows. But, as the thesis goes, "What can't go on forever must stop." When is this going to stop? Or is there some other source of silver we just don't know about that continues to fill the physical orders?

+0

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